Homework Help: economics

Posted by ali on Saturday, October 31, 2009 at 10:08am.

(A) “Market demand for wheat is relatively stable over time but market supply of wheat is very much influenced by the weather. For example, a natural drought decreases the supply of wheat and pushes up its prices while a bumper crop can severely depress wheat prices. Acts of nature thereby can result in large increases or decreases in the prices of agricultural commodities. The profitability of farmers becomes uncertain, as does the prices of food products and income needed to feed a household.”
Keeping in view the scenario (A), suggest the most appropriate action that the government should take in this situation in order to stabilize the wheat farmer’s income and to encourage them to continue farming whether there are bumper crops or droughts.

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